UAE rolls over $2 billion, easing Pakistan's economic strain

Prime Minister Shehbaz Sharif was able to secure fiscal relief for Pakistan as he announced that the United Arab Emirates (UAE) had agreed to roll over $2 billion in repayments. The repayment was due by this month but owing to Pakistan’s debt burden and liquidity issues, the UAE allowed Pakistan to roll the debt over.

As part of the International Monetary Fund’s (IMF) seven-billion-dollar bailout package to Pakistan, the cash strapped nation is supposed to attain external financing.

A multitude of countries have been actively assisting Pakistan over the past year with respect to financing. Last year, financial assurances from countries such as China, Kingdom of Saudi Arabia (KSA) and UAE proved instrumental in Pakistan’s journey to secure the IMF program.

The IMF had agreed to disburse funds only if Pakistan could roll over its debt that it had accrued over the years from these countries. This explains how important visits of the heads of state are between the two countries, especially for Pakistan, as it can effectively save the country from default.

Mr. Sharif, while addressing members of the cabinet, revealed that he had a meeting with President Sheikh Mohammed bin Zayed Al Nahyan of the UAE. While the exact reasons of the premiers trip to Pakistan are not known, Dawn News reported that he was on a personal visit to Pakistan.

Some analysts are speculating that the UAE president could be in Pakistan for investment purposes. However, the authenticity of these claims has not been validated. What is known however is that Mr. Sharif did ask the UAE to invest a few billion dollars in important projects as that would assist Pakistan.

Moreover, Mr. Sharif also told the cabinet that the UAE premier had confirmed his intent to positively consider investment initiatives in Pakistan adding that both countries share "brotherly ties".

While it is not certain if the UAE is ready to back Pakistani investment by funneling billions of dollars into the country, the two-billion-dollar extension on the debt could help the State Bank of Pakistan (SBP) to potentially meet its targets. One of these include the SBP maintaining a $13 billion reserve at the end of FY 2025. This condition could have face a significant setback had Pakistan been forced to pay back this debt.

A fall in the SBP reserves is the last thing lawmakers in Pakistan want as reserves are resting below the minimum threshold required by the reserve target at just $11.7 billion. For now, the rollover is being lauded as a massive achievement and experts are hoping that Dinars will trail the UAE president’s intent to invest in the country.